Worldwide investing in the broad category of companies that include solar, wind and biofuels, clean water, energy efficiency, and electric cars rose a healthy 43 percent in the second quarter, according to the Cleantech Group and Deloitte.
“Headline one says…it has clearly been a very strong quarter,” said Richard Youngman, head of global research for the Cleantech Group, during a press conference Thursday.
Preliminary results for the quarter showed $2.02 billion invested worldwide across 140 companies in the broad category known as cleantech, with the largest amount invested in solar companies and in North America. The second quarter followed a similar first quarter, meaning that for the first half of the year, cleantech investing around the world is up 65 percent over 2009.
Investment in the sector this quarter is ahead of the pace set in the first half of 2008, the previous record year for investing in companies in the field. So far this year, venture capitalists and large corporations have pumped $4.04 billion into cleantech, compared with $4.02 billion in the record-setting year of 2008.
But while the investment numbers may seem encouraging, one of the reasons for the healthy investment is not such great news. Despite the successful initial public offering of electric-car maker Tesla Motors this week, other prominent cleantech firms, notably solar-power firm Solyndra, have backed away from IPOs.
And those companies are big enough that they need big chunks of cash to keep going. When Solyndra pulled out of a planned $300 million IPO earlier this year due in large part to the market uncertainty caused by the European debt crisis, it took on $175 million in new venture funding instead. Goldwind, a Chinese solar firm, also pulled back from going public earlier this year.
“Goldwind and Solyndra’s recent IPO withdrawals have been the norm of late, and Tesla’s the trend-bucking exception,” Youngman said.
In fact, of the IPOs in the space worldwide in the field, China was the champ, with 12 public offerings that raised $1.7 billion, while only three cleantech companies went public in the U.S., raising $304 million.
“Right now, the data would suggest that if there’s an appetite for cleantech IPOs, it’s stronger in the East than in the West,” Youngman said.
Still, North America accounted for more than half of the overall venture investment in the space, with $1.46 billion in venture capital going to cleantech companies in the U.S. and Canada. California, with $980 million, accounted for a little less than half of all worldwide cleantech investment, and Massachusetts companies raised $124 million, more than Chinese and Indian companies combined.
European and Israeli companies accounted for $476 million. Chinese companies raised $30 million, and Indian companies raised $59 million.
Cleantech companies are raising their money from venture capitalists, of course, with companies like Kleiner Perkins Caufield & Byers, Khosla Ventures, and Draper Fisher Jurvetson all having been active in the space during the quarter.
But the analysts say that the huge amounts of money necessary to get, say, utility-scale solar or an electric-vehicle company on the road, the maturity of the companies, regulation, and the tightness of the IPO market are all also driving more corporate investment in cleantech.
Intel Capital and GE Capital, for instance, invested $52 million in smart-grid firm Open Peak. Toyota backed Tesla in that company’s IPO and plans to work with Tesla building electric cars. Intel Capital, GE Capital, Shell, and Cargill Ventures were all involved in at least one of the quarter’s top-10 deals.
“New corporate investors are entering the market each quarter,” said Jason Rissanen, leader of Deloitte’s cleantech practice.
And it’s not just investing as either a buyer of an individual company or as a venture investment, especially for utility companies, Rissanen said.
Utility companies are pouring money into cleantech both as buyers of cleantech companies’ services and to develop such capabilities of their own—driven by regulations such as California’s requirement that 20 percent of power come from renewable sources and by the specter of federal energy regulation.
“What we’ve seen on the utility side is most utilities have made some investment in alternative energy,” he said. “There are more and more companies coming into the area.”
